10-Q 1 q20310-q.txt SEABOARD CORPORATION 2ND QTR 2003 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) { X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 28, 2003 OR { } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-3390 Seaboard Corporation (Exact name of registrant as specified in its charter) Delaware 04-2260388 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 9000 W. 67th Street, Shawnee Mission, Kansas 66202 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (913) 676-8800 Not Applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes X . No . There were 1,255,053.90 shares of common stock, $1.00 par value per share, outstanding on July 25, 2003. Total pages in filing - 19 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Thousands of dollars) (Unaudited) June 28, December 31, 2003 2002 Assets Current assets: Cash and cash equivalents $ 23,792 $ 23,242 Short-term investments 28,359 30,337 Receivables, net 162,264 201,792 Inventories 236,263 243,949 Deferred income taxes 17,967 15,481 Other current assets 36,922 42,896 Total current assets 505,567 557,697 Investments in and advances to foreign affiliates 81,157 83,855 Net property, plant and equipment 641,167 621,593 Other assets 21,105 17,996 Total assets $1,248,996 $1,281,141 Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 39,872 $ 76,112 Current maturities of long-term debt 55,172 55,869 Accounts payable 68,400 67,464 Other current liabilities 142,766 156,917 Total current liabilities 306,210 356,362 Long-term debt, less current maturities 315,282 318,746 Deferred income taxes 79,837 71,509 Other liabilities 48,373 40,639 Total non-current and deferred liabilities 443,492 430,894 Minority interest 5,639 7,154 Stockholders' equity: Common stock of $1 par value, Authorized 4,000,000 shares; issued and outstanding 1,255,054 shares 1,255 1,255 Accumulated other comprehensive loss (58,276) (67,284) Retained earnings 550,676 552,760 Total stockholders' equity 493,655 486,731 Total liabilities and stockholders' equity $1,248,996 $1,281,141 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Thousands of dollars except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, 2003 2002 2003 2002 Net sales $ 485,883 $ 477,104 $ 947,750 $ 920,027 Cost of sales and operating expenses 448,866 436,962 875,384 836,799 Gross income 37,017 40,142 72,366 83,228 Selling, general and administrative expenses 26,728 24,950 54,103 51,282 Operating income 10,289 15,192 18,263 31,946 Other income (expense): Interest expense (6,728) (5,197) (13,549) (10,648) Interest income 845 1,487 1,587 3,162 Loss from foreign affiliates (2,587) (1,819) (5,878) (6,764) Minority interest 145 (366) (108) (543) Foreign currency loss, net (4,731) (8,582) (6,101) (13,996) Miscellaneous, net (876) (4,297) 1,332 (2,989) Total other income (expense), net (13,932) (18,774) (22,717) (31,778) Earnings (loss) before income taxes and cumulative effect of changes in accounting principles (3,643) (3,582) (4,454) 168 Income tax benefit 727 18,680 605 16,653 Earnings (loss) before cumulative effect of changes in accounting principles (2,916) 15,098 (3,849) 16,821 Cumulative effect of changes in accounting for asset retirement obligations and drydock accruals, net of income tax expense of $550 - - 3,648 - Net earnings (loss) $ (2,916)$ 15,098 $ (201)$ 16,821 Net earnings (loss) per common share: Earnings (loss) per share before cumulative effect of changes in accounting principles $ (2.32)$ 10.15 $ (3.06)$ 11.31 Cumulative effect of changes in accounting for asset retirement obligations and drydock accruals - - 2.90 - Net earnings (loss) per common share $ (2.32)$ 10.15 $ (0.16)$ 11.31 Dividends declared per common share $ 0.75 $ 0.75 $ 1.50 $ 1.00 Average number of shares outstanding 1,255,054 1,487,520 1,255,054 1,487,520 Pro forma amounts assuming changes in accounting for asset retirement obligations and drydock accruals were applied retroactively: Net earnings (loss) $ (2,916)$ 15,315 $ (3,849)$ 17,827 Net earnings (loss) per common share $ (2.32)$ 10.29 $ (3.06)$ 11.98 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Thousands of dollars) (Unaudited) June 28, June 29, 2003 2002 Cash flows from operating activities: Net earnings $ (201) $ 16,821 Adjustments to reconcile net earnings to cash from operating activities: Depreciation and amortization 32,170 25,222 Loss from foreign affiliates 5,878 6,764 Foreign currency exchange loss (gain) (4,602) 10,219 Cumulative effect in accounting changes, net (3,648) - Deferred income taxes 1,294 (17,247) Changes in current assets and liabilities: Receivables, net of allowance 42,284 (19,896) Inventories 11,442 8,722 Other current assets 5,694 10,801 Current liabilities exclusive of debt (8,521) (22,782) Other, net (1,559) 125 Net cash from operating activities 80,231 18,749 Cash flows from investing activities: Purchase of short-term investments (17,881) (46,629) Proceeds from the sale or maturity of short-term investments 20,359 84,699 Investments in and advances to foreign affiliates, net (461) 369 Capital expenditures (18,120) (21,366) Other, net 2,471 (148) Net cash from investing activities (13,632) 16,925 Cash flows from financing activities: Notes payable to banks, net (36,240) (6,821) Principal payments of long-term debt (29,316) (28,597) Dividends paid (1,883) (1,487) Bond construction fund 658 575 Other, net (1,623) - Net cash from financing activities (68,404) (36,330) Effect of exchange rate change on cash 2,355 (2,473) Net change in cash and cash equivalents 550 (3,129) Cash and cash equivalents at beginning of year 23,242 22,997 Cash and cash equivalents at end of period $ 23,792 $ 19,868 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Note 1 - Accounting Policies and Basis of Presentation The condensed consolidated financial statements include the accounts of Seaboard Corporation and its domestic and foreign subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation. The Company's investments in non-controlled affiliates are accounted for by the equity method. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2002 as filed in its Annual Report on Form 10-K, as amended. The Company's first three quarterly periods include approximately 13 weekly periods ending on the Saturday closest to the end of March, June and September. The Company's year- end is December 31. The accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations for interim periods are not necessarily indicative of results to be expected for a full year. Interest Rate Exchange Agreements The Company's interest rate exchange agreements do not qualify as hedges for accounting purposes. During the three and six months ended June 28, 2003, the Company recorded losses of $6,945,000 and $7,694,000 respectively related to these swaps compared to losses of $9,638,000 and $8,478,000 for the same periods of 2002. The gains and losses are included in miscellaneous, net on the Condensed Consolidated Statements of Earnings and reflect changes in fair market value, net of amounts paid or received. These losses include 2003 net payments of $958,000 and $2,943,000 for the three and six month periods, respectively, resulting from the difference between the fixed rate paid and variable rate received on these contracts compared with payments of $823,000 and $2,298,000 for the same periods in 2002. Supplemental Non-cash Disclosures As more fully described in Note 2, the volatility of the Argentine peso has affected the U.S. dollar value of the peso-denominated assets and liabilities of the Sugar and Citrus segment. The following table shows the non-cash impact of the change in exchange rates on various balance sheet categories, caused by the peso devaluation during 2002 and subsequent strengthening during 2003. During the six months ended June 28, 2003, the Company recorded non-cash net gains of $4,602,000 compared with non-cash net losses of $10,219,000 for the same 2002 period related to revaluations of certain dollar denominated net liabilities. In addition, see Note 2 for a discussion of the tax benefits recorded in the second quarter of 2002 related to the devaluation. Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, Increase (Decrease) (thousands of dollars) 2003 2002 2003 2002 Working capital $ 3,687 $(2,415) $ 7,972 $(15,420) Fixed assets 4,047 (6,075) 8,377 (34,905) Other long-term net assets or liabilities 380 (447) 405 (834) During the second quarter of 2003, in connection with the purchase of certain hog production facilities previously leased under a master lease agreement, the Company recorded fixed assets of $25,042,000, and assumed debt and a related interest payable totaling $24,507,000. See Note 5 for additional discussion. Accounting Changes and New Accounting Standards Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standard No. 143 (FAS 143), "Accounting for Asset Retirement Obligations," which required the Company to record a long- lived asset and related liability for asset retirement obligation costs associated with the closure of the hog lagoons it is legally obligated to close. Accordingly, on January 1, 2003, the Company recorded the cumulative effect of the change in accounting principle with a charge to earnings of $2,195,000 ($1,339,000 net of tax), an increase in fixed assets of $3,221,000, and the recognition of a liability, discounted to reflect present value, of $5,416,000. The retirement asset will be amortized over the economic life of the related asset. The Company currently estimates the annual accretion of the liability and amortization of the assets during 2003 will increase cost of sales by approximately $560,000. The adoption of SFAS 143 decreased operating income by $140,000 and $255,000, and net earnings by $85,000 and $156,000, or $0.07 and $0.12 per common share respectively, for the three and six months ended June 28, 2003. If the Company had adopted SFAS 143 retroactively to January 1, 2002, operating income, net earnings and net earnings per common share would have decreased by $116,000, $71,000 and $0.05 per share, respectively, for the three months ended and $232,000, $142,000 and $0.10 per share, respectively, for the six months ended June 29, 2002. Through December 31, 2002, costs expected to be incurred during regularly scheduled drydocking of vessels were accrued ratably prior to the drydock date. Effective January 1, 2003, the Company changed its method of accounting for these costs from the accrual method to the direct-expense method. Under the new accounting method, drydock maintenance costs are recognized as expense when maintenance services are performed. The Company believes the newly adopted accounting principle is preferable in these circumstances because the maintenance expense is not recorded until the maintenance services are performed and, accordingly, the direct-expense method eliminates significant estimates and judgments inherent under the accrual method. As a result, on January 1, 2003, the Company reversed the balance of the accrued liability for drydock maintenance as of December 31, 2002 for its Marine, Commodity Trading and Milling, and Power segments, resulting in an increase in earnings of $6,393,000 ($4,987,000 net of related tax expense) as a cumulative effect of a change in accounting principle. The application of the new accounting principle decreased operating income and net earnings for the second quarter of 2003 by $612,000 and $528,000, respectively ($0.42 per common share). For the six months ended June 28, 2003, operating income and net earnings increased $396,000 and $219,000, respectively ($0.17 per common share). The Company currently estimates the change from accruing in advance to expensing as incurred will reduce cost of sales by approximately $700,000 during 2003. If the change in accounting principle was made retroactively to January 1, 2002, operating income, net earnings and net earnings per common share would have increased by $356,000, $289,000, and $0.19 per share respectively, for the 2002 three month period and $1,555,000 and $1,148,000, and $0.77 per common share, respectively, for the 2002 six month period. In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities". FIN 46 applies to an entity if its total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated support or if the equity investors lack certain characteristics of a controlling financial interest. If an entity has these characteristics, FIN 46 requires a test to identify the primary beneficiary based on expected losses and expected returns associated with the variable interest. The primary beneficiary is then required to consolidate the entity. While the consolidation requirements applied to all variable interest entities (VIEs) created after January 31, 2003, for VIEs that existed prior to February 1, 2003, the consolidation requirements are effective if those VIEs remain in existence for reporting periods beginning after June 15, 2003. The Company will remain a party to certain contract production agreements (the "Facility Agreements") with limited liability companies which own certain of the facilities used in connection with the Company's vertically integrated hog production. Through June 28, 2003, these arrangements have been accounted for as operating leases. These facilities are owned by companies considered to be VIEs in accordance with FIN 46, for which the Company is deemed to be the primary beneficiary. Accordingly, the Company will be required to consolidate these entities in the third quarter of 2003. Under one Facility Agreement, the Company has certain rights to acquire any or all of the properties at the conclusion of their respective terms at a price which is expected to reflect estimated fair market value of the property. In the event the Company does not acquire any property which it has ceased to lease, the Company has a limited obligation for any deficiency between the amortized cost of the property and the price for which it is sold, up to a maximum of 80% to 87% of amortized cost. As of June 28, 2003, the value of fixed assets related to this property was $30,500,000. Consolidation of these two VIEs at the beginning of the third quarter of 2003 will increase fixed assets, related debt, and noncontrolling interest by $32,862,000, $32,338,000, and $1,724,000, respectively, and the Company will record a cumulative effect of a change in accounting principle for the excess of fixed asset depreciation over mortgage loan amortization of $1,158,000, ($706,000 net of tax, or $0.56 per common share). Note 2 - Comprehensive Income (Loss) Components of total comprehensive income (loss), net of related taxes, are summarized as follows: Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Thousands of dollars) 2003 2002 2003 2002 Net (loss) income $(2,916) $15,098 $ (201) $16,821 Other comprehensive income (loss) net of applicable taxes: Foreign currency translation adjustment 2,354 31,438 9,145 (3,642) Unrealized gains on investments 70 500 38 127 Net unrealized gains (losses) on foreign exchange cash flow hedges 61 213 (75) 76 Amortization of deferred gain on interest rate swaps (50) (50) (100) (100) Total comprehensive income (loss) $ (481) $47,199 $ 8,807 $13,282 The components of and changes in accumulated other comprehensive loss for the six months ended June 28, 2003 are as follows: Balance Balance December 31, Period June 28, (Thousands of dollars) 2002 Change 2003 Foreign currency translation adjustment $(62,555) $ 9,145 $(53,410) Unrealized loss on investments 118 38 156 Unrecognized pension cost (5,799) - (5,799) Net unrealized gain on cash flow hedges - (75) (75) Deferred gain of interest rate swaps 952 (100) 852 Accumulated other comprehensive loss $(67,284) $ 9,008 $(58,276) The foreign currency translation adjustment primarily represents the effect of the Argentine peso devaluation on the net assets of the Company's Sugar and Citrus segment as first recorded by the Company in the fourth quarter of 2001 when the one to one parity with the U.S. dollar was lifted. Since that time, the peso has devalued approximately 65%. As of June 28, 2003, the Company had $60,189,000 in net assets denominated in Argentine pesos which have been revalued through the foreign currency translation adjustment. In addition, the Company had $13,849,000 of dollar denominated net liabilities which are first revalued to the peso currency through earnings. During 2003, the strengthening of the peso increased total stockholders' equity by $12,985,000 including an earnings increase of $1,378,000 for the dollar denominated net liabilities, and a positive translation adjustment of $11,607,000 included as a component of other comprehensive income. During 2002, the devaluation of the peso resulted in a charge against earnings of $12,304,000 for the six months ended June 29, 2002 for the dollar denominated net liabilities, and an additional translation loss of $37,831,000 included as a component of other comprehensive loss. Until the second quarter of 2002, no tax benefit was provided related to the reduction to stockholders' equity. However, after a series of transactions was completed which changed the organizational structure of the Company's Sugar and Citrus segment, a deferred tax benefit of $34,641,000 relating to the currency translation adjustment component of accumulated other comprehensive loss, and a one-time current benefit of $14,303,000 were recorded in the second quarter of 2002. Since then, income taxes have been accrued at a 35% rate. The unrecognized pension cost is calculated and adjusted annually during the fourth quarter. With the exception of the foreign currency translation loss discussed above, income taxes for components of accumulated other comprehensive loss were recorded using a 39% effective tax rate. Note 3 - Inventories The following is a summary of inventories at June 28, 2003 and December 31, 2002 (in thousands): June 28, December 31, 2003 2002 At lower of LIFO cost or market: Live hogs & materials $137,771 $129,386 Dressed pork & materials 21,914 21,198 159,685 150,584 LIFO allowance (13,907) (11,422) Total inventories at lower of LIFO cost or market 145,778 139,162 At lower of FIFO cost or market: Grain, flour and feed 63,828 80,618 Sugar produced & in process 9,473 9,929 Other 17,184 14,240 Total inventories at lower of FIFO cost or market 90,485 104,787 Total inventories $236,263 $243,949 Note 4 - Contingencies In early 2003, individual bills (the Bills) were introduced in the United States Senate and House of Representatives which include a provision to prohibit meat packers, such as the Company, from owning or controlling livestock intended for slaughter. The Bills also contain a transition rule applicable to packers of pork providing for an effective date which is 18 months after enactment. Similar language was passed by the U.S. Senate in 2002 as part of the Senate's version of the Farm Bill, but was eventually dropped in conference committee and was not part of the final Farm Bill. If any of the Bills containing the proposed language become law, it could have a material adverse effect on the Company, its operations and its strategy of vertical integration in the pork business. Currently, the Company owns and operates production facilities and owns swine and produces over three million hogs per year. If passed in their current form, the Bills would prohibit the Company from owning or controlling hogs, and thus would require the Company to divest these operations, possibly at prices which are below the carrying value of such assets on the Company's balance sheet, or otherwise restructure its ownership and operation. At June 28, 2003, the Company had $389,873,000 in hog production facilities classified as net fixed assets on the Consolidated Balance Sheet and approximately $32,862,000 in hog production facilities under facility agreements (see Note 1 for a discussion of FIN 46). In addition, the Company has $137,771,000 invested in live hogs and related materials classified as inventory on the Consolidated Balance Sheet. The Bills could also be construed as prohibiting or restricting the Company from engaging in various contractual arrangements with third party hog producers, such as traditional contract finishing arrangements. At June 28, 2003, the Company had approximately $67,247,000 in commitments through 2018 for various grower finishing agreements. In addition, another bill was introduced in the Senate in May 2003 which prohibits or severely limits the use of forward contracts for hog purchases. Accordingly, the Company's ability to contract for the supply of hogs to its processing facility could be significantly, negatively impacted. The Company, along with industry groups and other similarly situated companies are vigorously lobbying against enactment of any such legislation. However, the ultimate outcome is not presently determinable. The Company is a defendant in a pending arbitration proceeding brought by the owner of a chartered barge and tug which were damaged by fire after delivery of the cargo. Damages of $47.6 million are alleged. The Company received a ruling in the arbitration proceeding in its favor which dismisses the principal theory of recovery and that ruling has been upheld on appeal. The arbitration is continuing based on other legal theories, although the Company believes that it will have no responsibility for the loss. The Company has reached an agreement to settle litigation brought by the Sierra Club, subject to court approval. Under the terms of the settlement, the Company will conduct an investigation at three farms and potentially will be required to take remedial actions at the farms if conditions so warrant. The Company is subject to regulatory actions and an investigation by the United States Environmental Protection Agency and the State of Oklahoma. In the opinion of Management, the above action and investigation are not expected to result in a material adverse effect on the consolidated financial statements of the Company. The Company is subject to various other legal proceedings related to the normal conduct of its business, including various environmental related actions. In the opinion of management, none of these actions is expected to result in a judgment having a materially adverse effect on the consolidated financial statements of the Company. Certain of the Company's nonconsolidated affiliates and third party contractors who perform services for the Company have bank debt supporting their underlying operations. From time to time, the Company will provide guarantees of that debt allowing a lower borrowing rate or facilitating third party financing in order to further the Company's business objectives. The Company does not issue guarantees for compensation. The following table sets forth the terms of guarantees of third party and nonconsolidated affiliate bank indebtedness outstanding at June 28, 2003. Guarantee beneficiary Maximum exposure Maturity Foreign affiliate grain processor - Kenya $ 1,300,000 2003 Foreign affiliate food product distributor $ 400,000 2003 Various hog contract growers $ 1,585,000 2003 The Company's guarantees of the various hog contract growers renew annually through 2013 and 2014 until the related debt matures. The Company's Sugar and Citrus segment has agreed to market certain sugar product for a third party under a contract expiring in 2008. In the event the Company does not perform under the contract, it would be responsible to make payments to the third party of a maximum of $1,000,000 for 2003, decreasing annually to $200,000 in 2008. As of June 28, 2003, the Company had outstanding $15,079,000 of standby letters of credit (LCs) with various banks mostly to facilitate operations of consolidated subsidiaries. Of these LCs, $10,541,000 also reduced available borrowing capacity under the Company's credit lines. Also included in this amount is an LC issued to facilitate bank borrowing of the Company's Bulgarian wine affiliate totaling 1,431,000 Euros (approximately $1,635,000). As of June 28, 2003, this affiliate's borrowings totaled EU 375,000 (approximately $429,000). This affiliate has pledged inventory with a value of approximately $2,229,000 as collateral for the LC. Because the value of the inventory serving as collateral for the LC is considerably more than the balance of the related debt, the Company has determined the fair value of this LC to be immaterial. Note 5 - Segment Information The following tables set forth specific financial information about each segment as reviewed by the Company's management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income, along with losses from foreign affiliates for the Commodity Trading and Milling Division, is used as the measure of evaluating segment performance because management does not consider interest and income tax expense on a segment basis. During the second quarter of 2003, the Company purchased certain hog production facilities previously leased under a master lease agreement with Mission Funding, LLC for $25,042,000, consisting of $535,000 net cash and the assumption of $24,507,000 in bank debt and a related interest payable. Management ceased its shrimp, pickle and pepper farming operations in Honduras in the fourth quarter of 2001 and has been considering various strategic alternatives for the Produce Division. In February 2003, the Company signed a letter of intent with a local Honduran shrimp farmer for the sale of shrimp farming and shrimp processing assets for $3,900,000. As a substantial portion of the sale price is expected to be in the form of a long-term note receivable from the buyer, the Company will use the cost recovery method of accounting, and no gain will be recognized by the Company until the actual cash is collected. The sale is expected to be completed during the third quarter of 2003. In addition, certain pickle and pepper farming assets are leased to local farmers. Based on an impairment evaluation as of December 31, 2002, management believes the remaining carrying value of these assets is recoverable. As of June 28, 2003, the carrying value of these farming assets was $742,000 which is included with All Other in the total assets table below. The Bulgarian wine business (the Business) in which the Company owns a 37% interest, negotiated a series of extensions of principal payment due dates and revised payment terms through August 31, 2003, after it was unable to make scheduled principal payments to a bank. The terms of the latest extension require, among other provisions, the Business to repay the majority of the principal balance plus accrued interest by August 31, 2003 and the bank will forgive a portion of the debt upon achievement of certain terms and conditions. In the event the Business does not obtain external financing to make this payment, the impact on the Business and its financial condition is likely to impair the value of its assets, and its ability to continue to operate without pursuing bankruptcy protection. At December 31, 2002, the Business evaluated the recoverability of its long-lived assets based on projected future cash flows and, accordingly, the Company believes there is not an other-than-temporary decline in value of its investment, pending the resolution of negotiations for additional financing. As of June 28, 2003, the Company's investments in and advances to the Business totaled $18,630,000. The Company's share of losses from the Business is included with All Other in the loss from foreign affiliates table below. As of June 28, 2003 the Company owned approximately 20% of Fjord Seafood ASA (Fjord), an integrated salmon producer and processor headquartered in Norway, which is accounted for under the equity method. Due in part to sustained low world-wide salmon prices, the per share stock price of Fjord, as quoted on the Oslo Stock Exchange, has declined during 2003. As a result of this decline, the market value of the Company's investment in Fjord, based on the June 27, 2003 closing price, was $12,376,000 compared to the carrying value of $34,498,000. If Salmon prices do not improve and Fjord continues to sustain significant operating losses, certain of Fjord's assets could be deemed to be impaired, causing material charges against Fjord's earnings for the write-downs of Fjord's asset values and accordingly, the Company would record its share of the impairment charge. In addition, material charges to Fjord's earnings could lead to violations of Fjord's bank covenants potentially resulting in further declines in Fjord's stock price. The Company is monitoring these conditions which ultimately could result in a material charge to earnings during the second half of 2003, either through the equity in earnings adjustments related to Fjord's results of operations, including impairment charges, or through a decision by the Company's management that a portion or all of the difference in market value of Fjord's stock price compared to the Company's carrying value is deemed to be an other-than temporary decline in value. The Company's share of losses from Fjord is included in All Other in the Loss from Foreign Affiliates table and the investment balance is included with Corporate Items in the Total Assets table below. Sales to External Customers: Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Thousands of dollars) 2003 2002 2003 2002 Pork $191,187 $159,331 $345,113 $330,389 Commodity Trading and Milling 149,366 184,134 327,141 331,672 Marine 104,038 96,648 196,324 187,463 Sugar and Citrus 17,823 14,596 30,595 29,295 Power 16,793 16,313 34,417 28,525 All Other 6,676 6,082 14,160 12,683 Segment/Consolidated Totals $485,883 $477,104 $947,750 $920,027 Operating Income: Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Thousands of dollars) 2003 2002 2003 2002 Pork $ (259) $ (5,352) $ (1,704) $ (2,835) Commodity Trading and Milling 1,163 7,607 4,557 14,356 Marine 2,387 5,562 1,436 9,175 Sugar and Citrus 4,876 4,812 9,338 7,947 Power 2,476 3,287 4,941 4,912 All Other 23 (22) 810 (536) Segment Totals 10,666 15,894 19,378 33,019 Corporate Items (377) (702) (1,115) (1,073) Consolidated Totals $ 10,289 $ 15,192 $ 18,263 $ 31,946 Loss from Foreign Affiliates: Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Thousands of dollars) 2003 2002 2003 2002 Commodity Trading and Milling $ 41 $ (33) $ (1,659) $ (1,260) All Other (2,628) (1,786) (4,219) (5,504) Segment/Consolidated Totals $ (2,587) $ (1,819) $ (5,878) $ (6,764) Total Assets: June 28, December 31, (Thousands of dollars) 2003 2002 Pork $ 653,784 $ 627,937 Commodity Trading and Milling 198,631 239,187 Marine 117,159 117,366 Sugar and Citrus 78,307 69,515 Power 71,811 73,872 All Other 12,785 15,971 Segment Totals 1,132,477 1,143,848 Corporate Items 116,519 137,293 Consolidated Totals $1,248,996 $1,281,141 Administrative services provided by the corporate office are primarily allocated to the individual segments based on the size and nature of their operations. Corporate assets include short-term investments, certain investments in and advances to foreign affiliates, fixed assets, deferred tax amounts and other miscellaneous items. Corporate operating losses represent certain operating costs not specifically allocated to individual segments. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments as of June 28, 2003, remained consistent with year end balances as the reduction of receivable balances was used to pay maturing debt. Cash from operating activities for the six months ended June 28, 2003, increased $61.5 million compared to the same period one year earlier. The increase in cash flows was primarily related to changes in the components of working capital, primarily a change in receivables in the Commodity Trading and Milling segment, partially offset by lower net earnings. Within the Commodity Trading and Milling segment, lower sales in the second quarter of 2003 resulted in a decrease in receivables compared to higher sales in the second quarter of 2002 which caused an increase in receivables. Cash from investing activities for the six months ended June 28, 2003, decreased $30.6 million compared to the same period one year earlier. The decrease primarily reflects the high levels of short-term investments sold during 2002 primarily to repay the Company's maturing revolving credit facility. The Company invested $18.1 million in property, plant and equipment for the six months ended June 28, 2003, of which $10.7 million was expended in the Pork segment, $3.5 million in the Marine segment, $2.6 million in the Sugar and Citrus segment, and $1.3 million in other businesses of the Company. The Company invested $10.7 million in the Pork segment primarily for the expansion of existing hog production facilities, and land acquisition and permitting activities to support the requirements of a second processing plant. In addition, the hog production facilities previously leased from Mission Funding, LLC under a master lease arrangement were also purchased during the second quarter of 2003 for a total of $25.0 million, including the assumption of $24.5 million in bank debt and a related interest payable. The Company previously announced plans to build a second processing plant in northern Texas along with related plans to expand its vertically integrated hog production facilities. Based on current financial and market conditions in the pork industry caused by the oversupply of hogs and pork, the Company does not intend to proceed with the expansion project at this time beyond the expenditures required to allow future land development possibilities should market conditions change. If the Company ultimately pursues this project, it is also contingent on a number of other factors, including obtaining financing for the project, obtaining the necessary permits, commitments for a sufficient quantity of hogs to operate the plant, and no statutory impediments being imposed. As of June 28, 2003, $4.8 million of land, development costs, and land purchase options were included in fixed assets related to this project. During the remainder of 2003, the Company anticipates spending $4.5 million for activities to support this Texas project, and $6.1 million for improvements to existing hog production facilities and upgrades to the existing pork processing plant. The Company invested $3.5 million in the Marine segment primarily to expand and replace fleet and cargo transportation equipment and make facility improvements. During the remainder of 2003, the Company anticipates spending $5.8 million to purchase additional equipment. In addition, the Company is reviewing its options to purchase two previously chartered vessels for $4.0 million or enter into new lease agreements for the vessels. The Company invested $2.6 million in the Sugar and Citrus segment primarily for machinery and equipment, and improvements to sugarcane fields. During the remainder of 2003, the Company anticipates spending $1.4 million for additional improvements. Excluding the potential Pork expansion plans, management anticipates the additional 2003 capital expenditures for existing operations will be financed by internally generated cash or the use of available short- term investments. Cash from financing activities during the six months ended June 28, 2003 decreased $32.1 million compared to the same period in 2002 reflecting reductions in short-term borrowings. In the first quarter of 2003, the Company extended a $20.0 million revolving credit facility, and, for use by a subsidiary in the Commodity Trading and Milling segment, entered into two new committed lines for $75.0 million and $5.0 million which are secured by certain of the Company's commodity trading inventory and accounts receivable. The new subsidiary credit lines include financial covenants for that subsidiary which require maintenance of certain levels of working capital and net worth, and limitations on debt to net worth and liabilities to net worth ratios. As of June 28, 2003, the Company had committed lines of credit totaling $125.0 million and uncommitted lines totaling $58.8 million. Borrowings outstanding under committed and uncommitted lines as of June 28, 2003 totaled $20.1 million and $19.8 million, respectively. As of June 28, 2003, standby letters of credit of $10.5 million reduced the Company's borrowing capacity. The Company is a party to certain contract production agreements (the "Facility Agreements") with limited liability companies which own certain of the facilities used in connection with the Company's vertically integrated hog production. Through June 28, 2003, these arrangements have been accounted for as operating leases. These facilities are owned by companies considered to be VIEs in accordance with FIN 46, for which the Company is deemed to be the primary beneficiary. Accordingly, the Company will be required to consolidate these entities in the third quarter of 2003. Consolidation of these two VIEs at the beginning of the third quarter of 2003 will increase fixed assets, related debt, and noncontrolling interest by $32,862,000, $32,338,000, and $1,724,000, respectively, and the Company will record a cumulative effect of a change in accounting principle for the excess of fixed asset depreciation over mortgage loan amortization of $1,158,000, ($706,000 net of tax, or $0.56 per common share). In addition to the financing requirement to accommodate the Pork segment expansion plans, the Company continues to make payments on maturing Senior Notes. Management believes that the Company's current combination of liquidity, capital resources and borrowing capabilities will be adequate for its existing operations. Management is evaluating various alternatives for future financings to provide adequate liquidity for the Company's future operating and expansion plans. In addition, management intends to continue seeking opportunities for expansion in the industries in which it operates. See Note 4 to the Condensed Consolidated Financial Statements for additional information with regard to commercial commitments and contingent obligations. RESULTS OF OPERATIONS Net sales for the three and six months ended June 28, 2003, increased by $8.8 and $27.7 million, respectively, compared to the same periods one year earlier. Operating income for the three and six months ended June 28, 2003 decreased by $4.9 and $13.7 million, respectively, compared to the same periods one year earlier. Results of operations for interim periods are not necessarily indicative of results to be expected for a full year. Pork Segment Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Dollars in millions) 2003 2002 2003 2002 Net sales $ 191.2 $ 159.3 $ 345.1 $ 330.4 Operating loss $ (0.3) $ (5.4) $ (1.7) $ (2.8) Net sales for the Pork segment increased $31.9 and $14.7 million, respectively, for the three and six months ended June 28, 2003 compared to the same periods in 2002 primarily as a result of improved pork prices and, to a lesser extent, increased sales volumes for the second quarter of 2003. Excess domestic meat supplies resulted in lower sales prices throughout 2002 and into 2003, although prices have continued to improve during 2003 compared to the declining trend experienced throughout 2002. The increase in sales volume resulted from the sale of inventory built up in the first quarter of 2003 in anticipation of improved market conditions during the second quarter of 2003. Operating losses for the Pork segment decreased $5.1 and $1.1 million, for the three and six months ended June 28, 2003, respectively, compared to the same periods in 2002. The decreases primarily reflect improved market prices discussed above partially offset by higher feed costs. The second quarter 2003 operating loss includes a $1.6 million charge for abandoned land development costs for several potential hog production sites that the Company determined it would no longer pursue. While unable to predict future market prices, management currently expects overall market conditions to continue to improve compared to prior year allowing this segment to return to positive operating income for the remainder of 2003. Commodity Trading and Milling Segment Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Dollars in millions) 2003 2002 2003 2002 Net sales $ 149.3 $ 184.1 $ 327.1 $ 331.7 Operating income $ 1.2 $ 7.6 $ 4.6 $ 14.4 Loss from foreign affiliates $ 0.0 $ 0.0 $ (1.7) $ (1.3) Net sales for the Commodity Trading and Milling segment decreased $34.8 and $4.6 million for the three months and six month periods ended June 28, 2003 compared to the same periods in 2002. The decrease for the quarter is primarily the result of lower commodity trading volumes to third party customers during the second quarter of 2003 as a result of changing crop conditions in Southern Africa. The decrease for the six months is primarily attributable to lower commodity sales to affiliates and, to a lesser extent, third party customers. Operating income for this segment decreased $6.4 and $9.8 million for the three and six months ended June 28, 2003, respectively, compared to the same periods in 2002. Operating income decreased primarily from lower margins on commodity trading activity as a result of higher freight costs and changes in local market conditions. Operating income was also decreased by, although to a lesser extent, lower commodity trading sales as discussed above and increased selling expenses and reserves for bad debts. In addition, while the Company believes its commodity futures and options are economic hedges of its firm purchase and sales contracts, the Company does not perform the extensive record-keeping required to account for commodity transactions as hedges. As a result, these derivative contracts have been marked-to-market through cost of goods sold, but the related, offsetting change in market value of the firm sales commitments have not been recognized. Operating income for 2003 included realized derivative gains of $2.0 and $1.6 million for the three and six months ended June 28, 2003 compared to gains of $2.0 and $5.2 million for the same periods in of 2002. Due to the political and economic conditions in the countries in which the Company operates, management is unable to predict future sales and operating results. Loss from foreign affiliates remained constant for the second quarter of 2003 and increased $0.4 million for the six months ended June 28, 2003, respectively, compared to the same periods in 2002. The increase for the six months is primarily a result of increased losses at a certain African milling operation. Based on the current political and economic situations in the countries in which the flour and feed mills operate, management believes that losses from foreign affiliates may continue for the remainder of 2003. Marine Segment Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Dollars in millions) 2003 2002 2003 2002 Net sales $ 104.0 $ 96.6 $ 196.3 $ 187.5 Operating income $ 2.4 $ 5.6 $ 1.4 $ 9.2 Net sales for the Marine segment increased $7.4 and $8.8 million for the three and six months ended June 28, 2003 compared to the same periods in 2002. These increases primarily reflect increased cargo volumes in most existing markets, certain new routes added during the fourth quarter of 2002, and chartering of certain company-owned vessels to carry military cargo to the Middle East. These increases were partially offset by the significant declines in cargo volumes for certain South American routes as a result of the political instability in Venezuela. Commercial activity has not yet recovered from the general strike that began in December 2002 and ended in February 2003. Lower average cargo rates also offset revenue increases when compared to the prior year. Operating income for the Marine segment decreased $3.2 and $7.8 million, respectively, for the three and six months ended June 28, 2003 compared to the same periods in 2002, primarily reflecting the effects of the political instability and the strike in Venezuela as discussed above, higher fuel costs and, to a lesser extent, increased selling and bad debt expenses. The duration and extent of reduced demand, primarily attributed to the economic contraction in Venezuela will continue to affect future results while shipping demand for affected South American routes remains depressed. Although Management expects operating results for this segment to remain profitable for the remainder of 2003, continued economic uncertainties in certain South American routes will continue to affect profitability. Sugar and Citrus Segment Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Dollars in millions) 2003 2002 2003 2002 Net sales $ 17.8 $ 14.6 $ 30.6 $ 29.3 Operating income $ 4.9 $ 4.8 $ 9.3 $ 7.9 The functional currency of the Sugar and Citrus segment is the Argentine peso. After the Argentine government ended the one peso to one U.S. dollar parity in January 2002, the peso suffered significant and on-going devaluation throughout most of 2002. For the three and six months ended June 28, 2003, this trend has reversed and the peso has regained some value. See Note 2 to the Condensed Consolidated Financial Statements for further discussion. Net sales for the Sugar and Citrus segment increased $3.2 and $1.3 million for the three and six months ended June 28, 2003 compared to the same periods in 2002. These increases are the result of higher sugar prices partially offset by reduced sales volumes, primarily for resale sugar as a result of lower quantities of sugar purchased from third parties. The peso price of sugar has increased over the 2002 period prices to offset the effects of the devaluation of the peso. Operating income increased $0.1 and $1.4 million for the three and six months ended June 28, 2003, respectively, compared to the same periods in 2002. The higher sugar prices are beginning to be offset by increased production costs from the inflationary effect on the local production components and the improving peso exchange rate. While management is not able to predict future sugar prices or whether costs will increase more than sugar prices in the coming months, management expects operating income will remain positive for 2003. Power Segment Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Dollars in millions) 2003 2002 2003 2002 Net sales $ 16.8 $ 16.3 $ 34.4 $ 28.5 Operating income $ 2.5 $ 3.3 $ 4.9 $ 4.9 Net sales for the Power segment increased $0.5 and $5.9 million, respectively, for the three and six months ended June 28, 2003 compared to the same periods in 2002 reflecting higher average spot market rates for 2003. Throughout the first quarter of 2002, spot market prices were lower compared with 2003 reflecting, in part, lower average fuel costs, a component of pricing. Prices gradually increased during the second quarter of 2002, ultimately reaching levels more comparable with 2003. The Company has begun to contract directly with approved large power users to reduce the exposure to changes in spot market rates and currency fluctuations. Contract pricing and the valuation of the corresponding receivable is more closely tied to the U.S. dollar while spot market sales are stated in Dominican Pesos. As of June 28, 2003, the Company has approved contracts in place for approximately 50% of its capacity. Operating income decreased $0.8 million for the three months ended June 28, 2003 and remained constant for the six months ended June 28, 2003 compared to the same periods in 2002 primarily reflecting a higher level of transmission fees assessed beginning in the second quarter of 2003 and higher fuel costs. Although net sales increased for the 2003 periods compared to 2002, these increases were offset by the increase in fuel costs and additional transmission fees. While management is not able to predict future spot market rates, it is anticipated that operating income will be lower for the remainder of 2003 compared to 2002. Foreign exchange losses are a component of other income (expense) and not operating income. The Dominican Peso has devalued significantly against the U.S. dollar during 2003. Accordingly, the Company has incurred foreign currency losses of $4.9 and $6.7 million for the three and six months ended June 28, 2003 related to the Power division. Although the Company cannot predict foreign currency exchange rates, given the current economic condition in the Dominican Republic, it is reasonable to assume that additional foreign currency losses will be incurred during the remainder of 2003. All Other Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, (Dollars in millions) 2003 2002 2003 2002 Net sales $ 6.7 $ 6.1 $ 14.2 $ 12.7 Operating income (loss) $ 0.0 $ 0.0 $ 0.8 $ (0.5) Loss from foreign affiliates $ (2.6) $ (1.8) $ (4.2) $ (5.5) Net sales and operating income for all other businesses increased for the three and six months ended June 28, 2003 compared to similar periods in 2002. In February 2003, management signed a letter of intent for the sale of the shrimp farming and shrimp processing assets, and is currently considering various alternatives for the remaining pickle and pepper farming assets. Management evaluated the recoverability of the pickle and pepper farming assets at December 31, 2002, and currently believes the remaining book value of $0.7 million is recoverable. A future impairment charge could be recognized however, depending on final decisions regarding the alternatives for these assets. The loss from foreign affiliates represents the Company's share of losses from equity method investments in Fjord Seafood ASA (Fjord) and a Bulgarian wine business. Continued losses from Fjord result from sustained low world-wide salmon prices. Although management cannot predict worldwide salmon prices, losses are expected to continue through the remainder of 2003. See Note 5 to the Condensed Consolidated Financial Statements for additional discussion regarding the potential for material charges to earnings during the second half of 2003 related to Fjord. The Bulgarian wine business (the Business) negotiated an extension of principal payment due dates and revised payment terms through August 31 2003, after it was unable to make scheduled principal payments to a bank. The terms of the latest extension require, among other provisions, the Business to repay the majority of the principal balance plus accrued interest by August 31, 2003 and the bank will forgive a portion of the debt upon achievement of certain terms and conditions. In the event the Business does not obtain external financing to make this payment, the impact on the Business and its financial condition is likely to impair the value of its assets, and its ability to continue to operate without pursuing bankruptcy protection. At December 31, 2002, the Business evaluated the recoverability of its long-lived assets based on projected future cash flows and, accordingly, the Company believes there is not an other- than-temporary decline in value of its investment, pending the resolution of negotiations for additional financing. As of June 28, 2003, the Company's investments in and advances to the Business totaled $18,630,000. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased $1.8 and $2.8 million, respectively, for the three and six months ended June 28, 2003 compared to the same periods in 2002. These increases primarily reflect increased selling and bad debt expenses in the Marine and Commodity Trading and Milling divisions. As a percentage of revenues, SG&A increased to 5.5% and 5.7% from 5.2% and 5.6%, respectively, for the three months and six months ended June 28, 2003 compared to the same periods in 2002. Interest Expense Interest expense increased $1.5 and $2.9 million, respectively, for the three and six months ended June 28, 2003 compared to the same periods in 2002. These increases are a result of higher average levels of short-term and long-term debt outstanding during the 2003 periods, partially offset by lower average interest rates. Interest Income Interest income decreased $0.6 and $1.6 million, respectively, for the three and six months ended June 28, 2003 compared to the same periods in 2002 primarily reflecting a reduction of average funds invested during 2003. Foreign Currency Losses, Net Foreign currency losses decreased $3.9 and $7.9 million for the three and six months ended June 28, 2003 compared with the same periods in 2002. The losses during 2003 primarily result from the effects of recent devaluation of the Dominican Republic peso on peso-denominated net assets of the Power division, principally customer receivables, partially offset by the effect of improvements in the Argentine peso on dollar denominated net liabilities of the Sugar and Citrus segment. See Note 2 to the Condensed Consolidated Financial Statements for additional discussion of the Argentine peso devaluation. The Company operates in many developing countries throughout the world. The political and economic conditions of these markets cause volatility in currency exchange rates and expose the Company to risk of exchange loss. Miscellaneous, Net Miscellaneous, net, for the 2003 three and six-month periods include gains of $4.7 and $6.6 million, respectively, related to proceeds from settlements of antitrust litigation primarily arising out of purchases by the Company of methionine, a feed additive used by the Company. The second quarter of 2002 includes a gain of $4.9 million related to proceeds from a settlement of antitrust litigation against several manufacturers of vitamins and feed additives. Miscellaneous, net also includes losses on interest rate exchange agreements of $6.9 and $7.7 million, respectively for the three and six months ended June 28, 2003 compared to losses of $9.6 and $8.5 million respectively, for the comparable 2002 periods. These swap agreements do not qualify as hedges for accounting purposes and accordingly, changes in the market value are recorded to earnings as interest rates change. Income Tax Expense During the second quarter of 2002, the Company recognized a one-time tax benefit of $14.3 million related to the Company's Sugar and Citrus segment. See Note 2 to the Consolidated Financial Statements for additional discussion. Excluding the effects of the one-time benefit discussed above, the income tax benefits recorded during 2003 decreased compared to 2002 primarily due to reduced levels of current year domestic net losses subject to tax. Other Financial Information In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest Entities". FIN 46 applies to an entity if its total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated support or if the equity investors lack certain characteristics of a controlling financial interest. If an entity has these certain characteristics, FIN 46 requires a test to identify the primary beneficiary based on expected losses and expected returns associated with the variable interest. The primary beneficiary is then required to consolidate the entity. The consolidation requirements apply to all variable interest entities (VIEs) created after January 31, 2003. The Company must apply the consolidation requirements for VIEs that existed prior to February 1, 2003 and remain in existence as of the beginning of the first reporting period beginning after June 15, 2003. See Note 1 to the Condensed Consolidated Financial Statements for the related disclosure of existing VIEs as of June 28, 2003 and the results of subsequent consolidation. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to various types of market risks from its day- to-day operations. Primary market risk exposures result from changing interest rates, commodity prices and foreign currency exchange rates. Changes in interest rates impact the cash required to service variable rate debt. From time to time, the Company uses interest rate swaps to manage risks of increasing interest rates. Changes in commodity prices impact the cost of necessary raw materials, finished product sales and firm sales commitments. The Company uses corn, wheat, soybeans and soybean meal futures and options to manage certain risks of increasing prices of raw materials and firm sales commitments. From time to time, the Company uses hog futures to manage risks of increasing prices of live hogs acquired for processing. Changes in foreign currency exchange rates impact the cash paid or received by the Company on foreign currency denominated receivables and payables. The Company manages certain of these risks through the use of foreign currency forward exchange agreements. Changes in the exchange rate for the Argentine peso affect the valuation of foreign currency denominated net assets of the Company's Argentine subsidiary and net earnings for the impact of the change on that subsidiary's dollar denominated net liabilities. The Company's market risk exposure related to these items has not changed materially since December 31, 2002. Item 4. Controls and Procedures The Company has established a system of controls and other procedures designed to ensure that information required to be disclosed in its periodic reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. These disclosure controls and procedures have been evaluated under the direction of the Company's Chief Executive Officer and Chief Financial Officer as of the end of the period covered by this report. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective. There has not been any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. - On May 6, 2003 Seaboard Corporation filed a report on Form 8-K including the press release of earnings of Seaboard Corporation for the first quarter ended March 29, 2003. This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include statements concerning projection of revenues, income or loss, capital expenditures, capital structure or other financial items, statements regarding the plans and objectives of management for future operations, statements of future economic performance, statements of the assumptions underlying or relating to any of the foregoing statements and other statements which are other than statements of historical fact. These statements appear in a number of places in this Report and include statements regarding the intent, belief or current expectations of the Company and its management with respect to (i) the cost and timing of the completion of new or expanded facilities, (ii) the Company's ability to obtain adequate financing and liquidity, (iii) the price of feed stocks and other materials used by the Company, (iv) the sale price for pork products from such operations, (v) the price for the Company's products and services, (vi) the demand for power and related spot prices in the Dominican Republic, (vii) the effect of currency fluctuations of the Argentine and Dominican Republic pesos, (viii) the effect of changes to the produce division operations on the consolidated financial statements of the Company, (ix) the potential effect of the proposed meat packer ban legislation, (x) the effect of the national strike in Venezuela on the Company's Marine Division, (xi) the potential effect of the Company's investments in a wine business and salmon and other seafood business on the consolidated financial statements of the Company, (xii) the potential impact of various environmental actions pending or threatened against the Company or (xiii) other trends affecting the Company's financial condition or results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of various factors. The accompanying information contained in this Form 10-Q, including without limitation the information under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations," identifies important factors which could cause such differences. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: August 8, 2003 Seaboard Corporation by: /s/ Robert L. Steer Robert L. Steer, Senior Vice President, Treasurer, and Chief Financial Officer (principal financial officer) by: /s/ John A. Virgo John A. Virgo, Corporate Controller (principal accounting officer)